On The Road Again
April 14, 2024
This Week in The Autonomy Economy, The Road to Autonomy Index declined 1.75%, Cruise announced they are returning to public roads, Gatik is preparing to go fully autonomous in Texas, Walmart is deploying autonomous forklifts in four distribution centers and Waymo began paid commercial service in Los Angeles.
As Cruise prepares to get back to business, they are shifting gears and heading to The Grand Canyon State. Pivoting to Arizona is the right decision. The state is welcoming to autonomous vehicles all without the bureaucracy and politics of California.
Waymo (formerly known as the Google Self-Driving Car Project) knew the benefits of testing and deploying autonomous vehicles in Arizona earlier then their competitors. Waymo first entered Arizona in 2016 before eventually making their way to San Francisco and Los Angeles.
Even with the pending SB 915 bill in California that would give local city governments regulatory control over autonomous vehicles, Waymo continues to expand commercial operations in the state.
It’s a brave move by Waymo, one that should be commended. Waymo is not shaking in their boots, as special interests ramp up pressure on California legislators to destroy California’s innovation economy for their own financial gain.
Waymo is holding firm and doing what is right for the residents of California and California’s innovation economy. The argument special interests are making about autonomous vehicles not being safe is now turning into an autonomous vehicles kills jobs argument.
The safety argument fell flat as there was no substantial data to back up those claims, so now job loss is the new boogeyman. The job loss argument is factually incorrect. Walmart, one of the largest employers in North America is introducing autonomous forklifts, while creating new high paying jobs for associates.
Autonomy is good for the economy. Autonomy is going to create jobs and economic prosperity for billions of individuals around the world.
Next week we are launching The Autonomy Leaderboard in a special edition of This Week in The Autonomy Economy.
The Autonomy Leaderboard will track the leaders in the development and commercialization of autonomous vehicles and trucks. The leaderboard will be updated quarterly.
Cruise parent GM, Walmart and Waymo parent Alphabet are The Road to Autonomy Index component companies
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What’s Moving the Markets
On The Road Again
On April 9th, GM announced Cruise is preparing to once again test autonomous vehicles (with safety drivers) on public roads.
In a strategic move, Cruise is pivoting operations from San Francisco to Phoenix. The pivot to Phoenix is a wise move and one that should have happened long ago.
The State of Arizona has favorable regulations for autonomous vehicles and a stable political environment that encourages and rewards innovation. While Cruise is taking the first step towards rebuilding operations, the company is still in search of credibility.
In an April 3rd research report, Citi Autos Equity Research Analyst Itay Michaeli highlighted the need for Cruise to develop credibility.
Next GM Catalysts? — Expect a solid Q1 but not a significant uplift in 2024 street estimates with guidance likely to be confirmed and inventory a bit elevated. That said, we believe 2025 street estimates have ample room to move higher.
Beyond Q1, the Ultium ramp will come under greater focus. With EV expectations quite low, we still like risk/reward here particularly now that the opportunity for U.S. EV share gains has become more apparent post Tesla’s Q1 deliveries.
A formal Cruise reset is also expected. The outcome remains unclear, but we wouldn’t be surprised to see Cruise pivot more towards partnering with rideshare companies to mitigate losses (Motional lost only $0.6bln last year) and execution risks.
If a Cruise plan is viewed credibly, then the story could again come to be viewed as a source of major AI/SW upside—not in our $95 target. We remain bullish on the AV opportunity. Lastly, we still see substantial merit in GM re-segmenting or separately disclosing its Truck vs. Non-Truck franchises, both to drive SoP consideration (and the point on the Boeing comparable), and to show a clearer EV accretion path in Non-Truck.
– Itay Michaeli, Autos Equity Research Analyst, Citi | Three Incremental Thoughts with GM at $45; Maintain Top Pick report – April 3, 2024)
Cruise does not just have to develop credibility with regulators and the public, GM also has to re-build their autonomous driving credibility with Wall Street. GM and Cruise have a lot of work ahead of time. This time, they have to make the right decisions.
Our take: How committed will GM be to a rebooted Cruise? That is the question we will be asking as Cruise continues to ramp up testing and eventually commercial operations in Phoenix.
Cruise parent GM is a The Road to Autonomy Index component company
Here Comes the Tesla Robotaxi
On August 8th, Tesla will unveil their robotaxi.
With the unveiling of the Tesla robotaxi officially on the calendar and Reuters reporting the suspected cancellation of the Model 2, analysts are trying to piece together the Tesla story, while Tesla “fans” on X and Reddit continue to praise the autonomous driving breakthroughs Tesla has made with FSD 12.3.4.
While the users of the product praise it, analysts who cover Tesla on Wall Street are not so sure FSD and the Tesla Robotaxi are going to move the needle.
What Analysts are Saying
If TSLA were to potentially cancel the Model 2, we’d view this as negative for the stock. In our view, robotaxi technology will take longer to develop, be in smaller volumes (but could be more profitable) and face higher regulatory risk.
– Joseph Spak, Analyst, UBS | Wither Model 2? Not so fast…, April 5, 2024 report
The FSD bull case? We’re not so sure… Some investors have interpreted the timing of this story with excitement around the latest version of FSD and an earlier scaling up of a Tesla robotaxi business. While we do believe Tesla has advantages around developing the computer vision/robotics technologies necessary to be dominant in autonomous driving, we believe a host of legal/regulatory issues will make this journey measured in decades rather than years.
– Adam Jonas, Equity Analyst, Morgan Stanley | Okay, What Just Happened?, April 5, 2024 report
Raising the FSD Bet Again? A shift toward Robotaxi is high risk in our view. While it’s likely TSLA will deliver an improved L2+ autonomous driving systems, most experts see Level 4/5 full self-driving, needed for Robotaxi, as at least a decade away. Most are also skeptical of TSLA’s vision only approach (vs. multi-sensor with HD maps). In our downgrade, we also noted turnover on the Dojo & FSD teams. Consequently, we are doubtful Robotaxi will be a mid-term volume driver.
– Colin M. Langan Equity, Analyst, Wells Fargo Securities
Either way, there is clearly a divide between what the analysts are expecting and what owners of Tesla’s with FSD are experiencing. If FSD continues to improve at the level it has been, the analysts will be proven wrong as Tesla will be able to scale a robotaxi business.
In our opinion, now is the right time to introduce the robotaxi as the market for autonomous driving is once again heating up. For Tesla to continue to grow, they do not need to introduce the Model 2 now.
Instead Tesla needs to demonstrate ways to lower the cost of the Model 3/Y and shift customers towards into more software subscriptions. The margins are in the software, not the vehicle.
Then there is the thought, is the Model 2 really the robotaxi? Could Tesla introduce two versions of the robotaxi — one with a steering wheel and pedals and one without? By doing this, Tesla would signal to Wall Street their long-term ambitions without having to get a NHTSA exemption.
If this is indeed the strategy, when and where does Tesla begin testing their robotaxis? Austin?
Our take: Tesla is going to “crack” autonomous driving. It’s only a matter of when, not if. When the company “cracks” autonomous driving, the ripple effects will be immense.
Tesla is a The Road to Autonomy Index component company
Freight-Only in Texas
It’s not just Aurora and Kodiak that are planning to go fully autonomous in Texas later this year, Gatik is as well. Later this year, Gatik will be launching freight-only (fully autonomous) operations of their Class 6 middle-mile delivery trucks in Texas.
This is not the first time that Gatik has gone fully autonomous. In 2021, Gatik became the first autonomous logistics company to operate Class 6 autonomous trucks on public roads with no safety driver. This deployment took place in Arkansas through a partnership with Walmart.
A year later, Gatik became the first company to deploy fully autonomous Class 6 trucks on public roads in Canada through a partnership with Loblaw.
As Gatik prepares for freight-only (fully autonomous) operations in Texas, the Dallas Fort-Worth Region is emerging as their strategic base of operations. By 2025, Gatik plans to scale their 50 truck fleet by 500%, with a majority of those trucks being deployed in Texas.
The decision to focus our operations in Texas is driven by its status as an international shipping hub, a regulatory environment that supports autonomous vehicle testing and deployment on public roads and of course favorable weather.
The abundance and variety of potential customers also allows us to conduct multi-tenant operations, meaning we can use the same truck throughout the day for multiple customers and increase our impact on supply chain operations.
– Gautam Narang, CEO & Co-Founder, Gatik
The old saying, everything’s bigger in Texas is true when it comes to autonomous trucking. Texas has emerged as The Capital of Autonomous Trucking because of their freight lanes, regulatory environment and Hillwood.
A lot of credit goes to Mr. Ross Perot Jr., Mr. Russell Laughlin and Mr. Ian Kinnie at Hillwood. The team at Hillwood had the vision to develop AllianceTexas and invite the autonomous trucking industry to setup shop. It worked as the Mobility Innovation Zone is now at the center of autonomous trucking industry.
If you are interested in learning more about Gatik and Hillwood, we would recommend the following podcasts:
- Investing in Growth, A Conversation with Gautam Narang, CEO & Co-Founder, Gatik and Annant Patel, Director, Koch Disruptive Technologies (November 2, 2021)
- AllianceTexas: Developing The Future, A Conversation with Ian Kinne, Director, Logistics Innovation, Hillwood (September 7, 2021)
Our take: Gatik continues to own the middle-mile.
Gatik partner Walmart is a The Road to Autonomy Index component company
Walmart Deploys Autonomous Forklifts in Distribution Centers
On April 11th, Walmart announced the company is deploying 19 autonomous forklifts across four high-tech distribution centers in partnership with Fox Robotics. The roll-out of autonomous forklifts is part of Walmart’s effort to automate their distribution centers.
As Walmart automates distribution centers, the company is creating new jobs. Associates are no longer unloading trucks and creating undue strain on their backs, they are now overseeing autonomous forklifts in a role that The Wall Street Journal has dubbed “Robot Wranglers”.
Our new autonomous forklift program with Fox Robotics is proof positive that when you empower associates, embrace innovation and welcome new opportunities, you’ll see growth for the business and its people.
– Shayne Wahlmeier, Vice President, Innovation & Automation, Walmart
Autonomy will create jobs. Walmart is at the forefront of implementing automation, while creating jobs.
Our take: Walmart is one of the most interesting companies in the logistics sector today.
Walmart is a The Road to Autonomy Index component company
Social Buzz
Waymo Lanches Paid Service in LA
On April 10th, Waymo began commercial operations in Los Angeles. Waymo’s commercial expansion to Los Angeles marks a major milestone in the development and commercialization of autonomous vehicles.
The company is permitted to operate in a 250 square mile ODD (operational design domain), however they are going to begin operations in a slimmed down ODD. To begin, the service will not go past Santa Monica Blvd (Route 2) to the north, while hovering around the 10 to the south.
As Waymo expands north of Sunset Blvd in Beverly Hills, who will be the first person to arrive at iconic The Beverly Hills Hotel in autonomous style? The makings of an Only in LA moment are in the works.
Our take: Waymo views LA as a $2 billion dollar market. While the company might view LA as a $2 billion dollar market, they have yet to release any economic data to back up that assessment. LA will be a very large market for Waymo. The only questions are, how large and how profitable?
Waymo parent Alphabet is a The Road to Autonomy Index component company
1 Billion Miles and Counting
Tesla’s data advantage continues to increase as the company has surpassed 1 billion miles driven on FSD (Full Self-Driving). With Tesla currently offering a one month free trial of FSD with a newly reduced price of $99 per month for Supervised Full Self-Driving, we will be watching the take-rates for increased signs of consumer interest in autonomous driving.
Our take: The more miles Tesla vehicles drive on FSD, the smarter FSD will get, further strengthening Tesla’s immense lead in the development of personally owned autonomous vehicles. Enter the Dojo, Tesla’s not so secret weapon.
Tesla is a The Road to Autonomy Index component company
Impact of Tesla’s Free FSD Trial on the Stock
Gary Black, Managing Partner of The Future Fund and prominent Tesla investor broke down the potential impact an increase in uptakes in FSD uptakes could have on Tesla’s stock.
While breaking down the potential impact on the stock, Mr. Black highlights the fact that Tesla should considering lowering the FSD subscription price to $99 per month. Two days after Mr. Black’s tweet, the company announced it had lowered the price to $99 a month for FSD (Supervised).
Over the long-term in our view the price of FSD will have to get down to $49.99 a month before it has a hockey stick growth moment. When we get there is the question, as we believe the subscription price of FSD will decrease over the coming years as Tesla focuses on growing FSD subscription revenue.
Our take: The future of Tesla is selling software subscriptions, not cars.
Tesla is a The Road to Autonomy Index component company
The Road to Autonomy Index® / Weekly Performance
The Road to Autonomy Index® is a high-definition lens into the emerging world of autonomous vehicles. It is the world’s first and only pure-play index designed to measure the performance of the autonomous vehicle/truck market.
For the week of April 8, 2024, The Road to Autonomy Index declined 1.75%, the S&P 500 declined 1.56% and the NASDAQ 100 declined 0.58%. The Road to Autonomy Index underperformed the S&P 500 0.19% and underperformed the NASDAQ 100 by 1.17%.
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Latest The Road to Autonomy & Autonomy Economy Podcasts
The Road to Autonomy and Autonomy Economy podcasts are hosted by Grayson Brulte. The Road to Autonomy features unconventional conversations about the future of mobility.
Autonomy Economy features an insider’s perspective on the economics of autonomy.
New episodes every Tuesday and Wednesday.
Tesla’s Data Advantage in the Race to Develop Autonomous Driving
Pete Bigelow, Senior Reporter, Automotive News joined The Autonomy Economy podcast to discuss Tesla’s data advantage and what it means to the development and commercialization of autonomous driving.
Listen on The Road to Autonomy | Apple Podcasts | Spotify | YouTube Music
Wednesday, April 10, 2024
The Will To Over-Regulate: Inside California Legislators Fight for Local Control over Autonomous Vehicles
Adam Kovacevich, Founder & CEO, Chamber of Progress joined The Road to Autonomy podcast to discuss the regulatory environment for autonomous vehicles in California and what impact if passed, local control would have on the deployment on AVs in California.
Listen on The Road to Autonomy | Apple Podcasts | Spotify | YouTube Music
Tuesday, April 9, 2024
Demystifying the Economics of Autonomous Trucking
Brett Suma, Founder & CEO, Loadsmith joined The Autonomy Economy podcast to discuss the unit economics of autonomous trucking and the Loadsmith self-balancing freight network.
Listen on The Road to Autonomy | Apple Podcasts | Spotify | YouTube Music
Subscribe to This Week in The Autonomy Economy™
A weekly newsletter featuring insight and commentary on the autonomy economy™ and how the financial markets are viewing its emergence.
All price references and market forecasts are as of the date that this newsletter has been sent. The Road to Autonomy is not providing any financial, economic, legal, accounting, or tax advice or recommendations in this newsletter. The information contained in this newsletter does not constitute investment advice and should not be relied upon to evaluate any potential transaction.
Inclusion of a security within The Road to Autonomy Index® is not a recommendation by The Road to Autonomy Indices LLC to buy, sell, or hold such security, nor is it considered to be investment advice.
